Department store retail giant Macy's is in trouble and is announcing a massive scaling back of operations and staffing in an attempt to right its financial ship.
According to a press release issued by the company Wednesday, Macy's plans to close a total of 68 stores in 2017, which represents about 10 percent of Macy's total storefront properties.
According to CNNMoney, the closures, along with a corporate reorganization, will result in the loss of about 10,000 U.S. jobs. Macy's in-store sales dropped 2.1 percent over the prior year in 2016, continuing an ongoing trend and sending Macy's stock plummeting.
Macy's is not the only retail company expected to face a financial crunch this year. Overall retail sales rose slightly in the fourth quarter of 2016, but many so-called brick-and-mortar retail operations have failed to adapt to marketplace incursions by online retailers like Amazon. Brick-and-mortar retailers, particularly of the mall-based variety, also face another challenge: Consumers are increasingly spending their money on "experiences" rather than physical goods.
As Bloomberg noted early last year, consumers saw an increase in their available discretionary income in 2016, but were more inclined to spend that money on travel, dining out and other experience-based retail:
Lower gas prices and higher employment rates aren’t creating much of a windfall for traditional brick-and-mortar retailers. Consumers are instead spending their discretionary income on experiences like travel and dining at restaurants. Retail sales rose 3 percent during the holiday season last year, the NRF said, missing the group’s projections for a 3.7 percent gain.
Add it all up, and Macy's announcement will likely be one of many similar messages from retail chains this year. Per CNNMoney:
Mark Cohen, a professor at Columbia Business School, said it's not the last time Macy's will make this type of announcement.
"It's a very hard day for the folks involved obviously, but I would also say it's inevitable," Cohen said. "And there's definitely more to come."
He said that Macy's — and its competitors in the brick-and-mortar retail industry — have been "unwilling to fully acknowledge the reality of their business performance," and he expects job cuts and store closures to be an ongoing trend in 2017.
An earnings report posted by Kohls () Wednesday followed the trend. The company posted a disappointing holiday sales season and lowered its earnings guidance for the 2016 fiscal year. Its stock dipped more than 7% during extended trading hours.
The full economic impact of this market adjustment is not yet known. Retail jobs comprise about 6 percent of the current U.S. workforce. Retail sales jobs tend to be low-wage, high-turnover positions and entice relatively low numbers of career employees. However, these jobs often provide stopgap and supplementary family income to populations who can ill-afford the loss of income.
These kinds of adjustments have already affected other job sectors, including manufacturing and coal mining, where automation and market forces have combined to eliminate jobs and drive some workers into a market-segment recession that is not being felt by the rest of the American economy. Unlike retail jobs, those jobs tended to be geographically clustered throughout the rust belt, and President-elect Donald Trump was able to harness the disaffection those workers have felt about their economic plight into a powerful political force.